There are several reasons for taking a loan. If your business is poised to expand, then capital infusion in the form of loans is worth it. Similarly, if you are in constant need of funds to finance your day to day activities like purchase of raw material, completing the conversion of mid-way processes etc. then it makes sense to go for a business loan. Working capital loans are vital for the sustenance of a startup business.
Whenever you talk to people about taking a small business loan for your business, there will be lots of advice pouring in from all directions. From a layperson to an expert, everyone will have something to add. Thus, before finalizing on which bank to approach, talk to a lot of informed people and consider their opinion before making a final decision. They will share their personal experiences regarding the pros and cons of taking a small business loan in India to run a startup.
There are some things you should take into account before you consider small business loans in India.
- Purpose of taking a loan: have a clear intention of taking a loan. You must know the exact way you are going to utilize the credit to reach the objectives you have set out to.
- Have a clear idea about your future course of action: When you plan to take a business loan to start a specific business, ask yourself certain questions.
- What kind of business do you want to start?
- How are you planning to take a loan?
- Will, you be able to repay the loan?
- The kind of credit you are receiving from a lender.
- Whether you want to borrow from a nationalized bank or a private financial institution?
- What are the flagship offerings of your business and the expected growth of your business?
- Whether you plan to convert your startup into a large scale business using your small business loan?
- Do you want to finance your existing business to generate retained earnings that would take care of the future financial needs of your new business?
- Build and maintain credibility:A borrower’s credit score is among the most important factors when it comes to availing a business loan. If the credit score is low, then a borrower must work towards enhancing it. A healthy credit score would enable the borrower to secure funds quickly at a favorable interest rate.
- Government Vs. Private Institutions:There are many government schemes for extending small business loans like MSME business loans, MUDRA loans, Credit guarantee fund schemes, etc. that charge lower interest rates. You can avail any amount up to 1 crore. The main aim of such schemes is to help the small business to earn more profits and flourish as small businesses contribute 29% to the GDP of India.
Private financial institutions offer several benefits such as flexible repayment terms, customized loan offerings etc. for borrowers.
In short, small loans for bad credit in India help startups and MSME companies to earn profits. Before you make a hasty decision regarding taking a small business loan to finance your tiny business, consider all the points mentioned above to make an appropriate and clear decision.